Tuesday, October 18, 2011

Debt Crisis - European Sovereign Debt Crisis

Economic uncertainty became the main topics nowadays, and everyone is focusing on the European countries' sovereign debt crisis - which is said to be one of the main contributor for the current gloomy economic situation. Some predict that it may risk the world to a double dip recession if it's not solved soon.

How had these sovereign debts developed into a crisis? The clue may be found from the following 2010 data:

It isn't viable when the percentage of debt is extremely higher over the income (i.e. GDP), and it will never be viable if it's occurring over 10 years period. Despite the word 'extremely higher' itself is pretty subjective..the above data indicate to me that there were indeed an extensive debt burden vs GDP growth and employment rate within some European countries..

To determine whether it is high or low, the following simple logic may be used: EXPENSES (or INVESTMENT) vs INCOME = GAIN or DEFICIT. which would be the result?....

Will another debt facility to these European countries solve this debt issues, and eventually solve the economic crisis?....this require in depth studies..

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